Wednesday, November 30, 2016

I have used Excel spreadsheet to list a few
listed companies in the Singapore stock exchange.

My selection criteria are very simple.

I choose those companies that pay
consistent dividend, and I know the business well enough.

After I have selected my stocks of about 10
companies, I list down the buying price, holding price and selling price.

This is very simple to do.

I will buy when the dividend yield is 7%,
sell when the dividend yield is 3% and hold when the dividend yield is 5%. However for large banks, I am comfortable
with buying at an yield of 5%, hold at 4%, and sell at 2.5%.

That means when the average dividend for
the past 5 years is 7 cents, I will buy the stock at $1, sell when the share
price reaches $2.33 and hold the stock when the share price is $1.40.

The reason I buy at $1 is because the
dividend is 7 cents, and that means 7% return.

The reason I sell at $2.33 is because the
dividend is still 7 cents, and that means I get only 3% return.

The reason I hold when the price is $1.40
is because the dividend yield is 5%.

That means I buy the shares at $1, and when
the share price keeps on going up until $2.33, I will sell.

If there is a change in business
environment, then I will sell at any price, even at a loss.

This simple and clear stock market strategy
contains both entry and exit price.

Thursday, November 10, 2016

There are some people who like to find the best
penny stock, so that they can make a few thousand dollars in a day.

This is not really an investment. It is a speculation. To be it more bluntly, it is a gamble.

It does not matter whether you are talking
about the stock market, real estate or other investments, as long as you bear
in mind that you are investing for income, you will gain slowly and surely in
the long run.

For example, you buy a rental apartment for
rental income. You invest for income.

If the property price improves, you can sell
the rental apartment for a gain. If you
choose not to sell, you can still gain from the rental income. This is the reason why investing for income
always works.

Saturday, October 22, 2016

After reading the news about Americans,
especially overseas Americans, who give up citizenship to save on paying tax, I
really feel sad about it.

I feel sad that the politicians think about
milking their people dry instead of creating jobs and improving productivity in
the economy.

I feel sad that money is more important
than loyalty to their country.

There is no point in singing patriotic
songs when people love their money more than their country.

When there are so many people who are
willing or who had died for their country, it is sad to see others who just
give up citizenship because they are not willing to give up some cash to help
their country.

Thursday, October 20, 2016

If you are an investor in the stock market,
the best advice is to use money that you do not need for a few years.

The experts will tell you not to borrow
money to buy shares.

However, there are certain situations when
it is good to borrow money to buy shares.

One of the situations is an exit offer.

When Company A wants to buy Company B, it
will have to offer a price.

If the share price of Company B is $1,
Company A may offer $1.25 to the shareholders of Company B.

When the news of the intention is out, the
share price of Company B will increase.
It may hit $1.15 or $1.20.

When the exit offer is confirmed, the price
is likely to increase till $1.23 or $1.24.

If you are very confident that the exit
offer will go through, because the shareholders of both Company A and Company B
are supportive, you can use all your savings, and borrow money to buy shares
from $1 all the way to $1.23.

Tuesday, October 11, 2016

When you receive money from the investment
of common stock, it can be a dividend or a capital distribution.

What is the difference between dividend,
and capital distribution?

We can use a simple example to show the
difference.

If you buy the shares of an investment
holding company with portfolio worth $100 million dollars, and this company
makes $10 million dollars in after tax profit, it will give out part of the
money in cash to you.

That is known as a dividend.

It is the after tax profit that you
receive.

If the investment holding company sells off
a company, and it makes $20 million from the sale, and give out the money to
you, that is a capital distribution.

The reason is that the holding company
could have kept the money as capital for future purchase. When it cannot find a good purchase, it will
return the money to the shareholders.

This reduces the capital of the holding
company, that is why the money you get is a capital distribution.

Monday, October 10, 2016

Sometimes when I talk to my friends about
investment, especially about my preference for cash dividend from share
investments, they point out that Warren Buffet does not give out cash dividends
to his shareholders.

That is true.

His reason is that he has better use of the
money to grow the company for his shareholders.

However, he expects all his investments to
produce cash dividend for him.

All of his companies have to forward the
excess cash to the holding company.

Thursday, October 6, 2016

In this
blog post, I will use DBS Group Holdings Ltd (as a proxy of the stock market)
to show dividend and share price relationship to determine undervalued and overvalued
market.

There is no
sure way of knowing the exact point when the stock market peaks or bottoms out.

However, if
you use the dividend and share price relationship, you can have a good feel of the
current market.

Overvalued
market means the share price is too high for the value of the stocks. If you buy at this time, you will overpay for
the shares.

Undervalued
market means that the share price is very low, and you use lesser money to buy
the great stocks.

How do you
use the dividend and share price as a guide?

The following is the price
chart of DBS Group Holdings Ltd from 2008 till now.

The credit goes to Yahoo!
Finance

The share price of DBS Group
Holdings Ltd reached a high point of $20.48 in 2008, and dropped to a low of
$6.90 in 2009.

The price range in 2010 was
rather stable from $13.50 to $15.50.

In 2011, the share price fell
below $12 for a short period. From then
on, the trend was uptrend until the share price hit a high of $21.40 in 2015.

As we can see from this
chart, the share price goes up and down.

Next, we check the dividend
of DBS Group Holdings Ltd. The data is
taken from SGX website, under corporate action.

We will see from 2009 onwards

Unlike the share price, the
dividend is more stable. For many years,
the annual dividend is 56 cents (except in 2010 where it is 14 cents lesser).

From 2015, the dividend
increased to 60 cents per share.

Now let us see the dividend
and share price relationship.

2009 was a very volatile
year. If an investor bought the share at
$6.90 and based on the average dividend of the year, the dividend yield would
be 8% (dividend of 58 cents divided by share price of $6.90).

If you bought at $15 in 2010,
and based on the dividend of 42 cents, the dividend yield would be 2.8%.

If you bought at $12 in 2011,
and based on the 58 cents dividend for the year, the dividend yield would be
more than 4%

A summary is given below.

Year

Dividend

Share price

Dividend Yield

2009

$0.58

$6.90

8.41%

2010

$0.42

$15.00

2.80%

2011

$0.58

$12.00

4.83%

2015

$0.60

$21.40

2.80%

2016

$0.60

$14.00

4.29%

Based on
the dividend and share price relationship, a dividend yield of 2.8% means that
you have bought into an overvalued market.

If the
dividend yield is 4% to 5%, that is a balanced market.

An undervalued
market happens when the dividend is stable, and the share price is driven down
by fear.

Since the
share price rises and falls all the time, and the dividend is stable, you can
use dividend as a guide to determine the current situation of the market.

No point
buying into an overvalued market. Best to
wait till the market is undervalued.

Tuesday, October 4, 2016

However, buying shares in the stock market
is easier than grocery shopping in a large supermarket.

When you want to go supermarket, you have
to decide on which one to go. There are
many national chains so you have to decide on one that has most items on sales
that week.

It is easier in stock market because each
country generally has one stock market. Some large countries have a few stock markets.

When you are grocery shopping, you have to
compare the different packing sizes, different brands, and the preference of
all in the family.

When you are buying shares, the only thing
you have to know is the profitability in term of capital gain, and dividend
income.

When you are grocery shopping, you have to
exercise self-control, so that you buy in bulk when the item is on sales.

Sometimes you have to check the price week
after week, and mentally compile the price increase or decrease for the past
year. In this way, you will know the
likely period when the item will be put on sale.

In the stock market, there are charts
available for you. You do not have to
check price every week.

The similarity is that you have to buy when
price is low. That means you invest in
stock market when the market crashes.
You buy groceries when the supermarket is having deep discount.

Sunday, October 2, 2016

I fondly
recalled the magical moment of reading Charlie and the Chocolate Factory by
Roald Dahl when I was a kid.

Our family
was quite poor, and like Charlie, we got to eat chocolate once a year.

That was
during the Chinese New Year period when chocolate was one of the traditional
goodies for our family to serve the guests.

I recalled
the happy moment of seeing myself in Charlie’s shoes as I took an imaginary
tour of the wonderful chocolate factory.

Now that I
re-read the book as an adult, I have a different perspective.

I see the sadness
of corporate downsizing and the loss of jobs for thousands of workers.

There are
two retrenchments mention in the book.

The first
retrenchment happened in the chocolate factory.
Mr Wonka realized that the competitors sent spies to steal his secrets
of making wonderful products.

He asked
the workers to leave, and closed the factory.
Thousands of workers lost their jobs.

The second
retrenchment happened to the toothpaste factory that employed Charlie’s father.

Charlie’s
father was very hardworking but he was in a lowly paid job. His work was to cap the tube of toothpaste.

No matter
how fast he was, or how hardworking he was, his income was barely enough to
feed the whole family.

The whole
family included his parents, his parents-in-law, he and his wife, and his son. It is definitely hard for a sole breadwinner
to take care of everyone, especially when the elderly ones are over 90 years
old, and have to stay in bed all the time.

Another
thing that touches me was the description of poverty.

When you
have bread for breakfast, boiled potato and cabbage for lunch, and cabbage soup
for dinner, life was not so enjoyable.

As a kid,
Charlie dreamt of chocolate.

When his
father lost his job, even cabbage became a rarity. The whole family starved, and for Charlie,
all he could think of is food.

That is the
form of poverty that most of us never have to experience.

The story
took a twist at this point, and it ended up with Mr Wonka selected Charlie as
his heir to take over the chocolate factory.

I sure wish
that every poor child has a mentor like Mr Wonka.

Mr Wonka
agreed to teach Charlie everything, and later on to take over the business.

In today’s
context, the only way for a poor kid to get out of poverty is to study very
hard, get a scholarship, and gain enough knowledge to start a business or work
as a professional.

Most kids
in poor countries do not have the chance to do that.

To them,
food is the most important in their life.
They can live without an education, but not without food.

They rather
work when they are old enough to work, and they rather have the money to buy
food for the family.

In many developing
countries, that means working at a sweatshop for kids who are less than 14
years old.

Saturday, October 1, 2016

Of all the
travel insurance policies I have bought over the years, I must say that the experience
with FWD Insurance Singapore is the best.

So far, I
do not have any experience with making claims, so I can only talk about the
buying experience.

There was a
time when I bought travel experience for a group of 6 persons.

I had to
collect all the travel documents, and then keyed in the data one by one,
including the name, passport number, expiry date and date of birth.

It was a
pain to do all the data entry.

The worst
is that later on, one of the persons renewed the passport, and I had to contact
the travel insurance to make amendment to the passport detail.

FWD
Insurance does not require all the details except for name and IC number for
all other passengers.

That makes
it easy to buy group insurance.

I sure
spend more time reading through the benefits and compare the three plans of
travel insurance than keying in the data.

I buy for the
three of us for our week-long trip to Thailand.

As of
today, the 10% discount coupon is still valid.
The coupon code is FWDST10.

On top of
that, a simple survey yields another 5% discount.

After I
have made the payment, FWD creates my account automatically. That means when I want to buy more policies,
I do not have to key in my personal data again.

You may
check out FWD Singapore to get quotation for travel insurance, car insurance,
and term life insurance.

Update on 3 October 2016:FWD customer officer calls me to ask if I have received the policy details sent by email. She also asks if I have clicked on the link to login to my account.As this account login is important in the event of claims, it is good of FWD Singapore to get a customer service officer to call.As of now, I am very happy that I have chosen to buy the travel insurance from them.
Up to date, none of the other insurers have ever followed up with a call after I purchased the travel insurance.